Caliber Home Loans, Inc. v. Zeller
205 Conn. App. 642
Conn. App. Ct.2021Background
- 1990: Michael A. Zeller executed an $85,000 promissory note secured by a mortgage on 272 Alewife Lane; the note was later endorsed in blank and the mortgage assigned through successors in interest.
- 2006: Zeller quitclaimed his interest in the property to Cambridge Holdings, Inc. (Cambridge); quitclaim did not, by itself, transfer note/mortgage obligations.
- 2013: Caliber Home Loans, Inc. commenced foreclosure; the mortgage was later assigned to Specialized Loan Servicing, LLC (SLS) in 2018 and SLS was substituted as plaintiff.
- At trial SLS produced the original note (endorsed in blank), the mortgage and witness testimony about document chain-of-custody; the trial court found SLS possessed the note and had standing to foreclose.
- The trial court found the debt to be $113,111.51, the property’s fair market value to be $204,000, rejected Cambridge’s special defenses (payment, equitable estoppel, unclean hands), and entered a judgment of strict foreclosure.
- On appeal the court affirmed the trial court on standing, notice, debt amount, and defenses, but reversed the remedy: because there was substantial equity, it directed a foreclosure by sale rather than strict foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to foreclose (ownership of note/debt) | SLS produced original note endorsed in blank and mortgage assignment; possession creates presumption of ownership | Cambridge: SLS lacked authority/ownership of the debt despite producing documents | Court: SLS’s possession and blank endorsement created prima facie ownership; finding not clearly erroneous (standing affirmed) |
| Standing to challenge notice/acceleration | Cambridge is not party to the note/mortgage and thus lacks contractual standing to challenge compliance | Cambridge: as property transferee and payor it was a "foreseeable interested party" entitled to challenge notice | Court: Quitclaim did not transfer note rights; Cambridge not a foreseeable beneficiary; lacked standing to challenge notice; admission of notice exhibits was proper |
| Proof of debt amount | SLS relied on witness testimony and affidavit of debt to establish outstanding balance | Cambridge: evidence was confusing/inconsistent; payments shown by Cambridge or related entities negated default | Court: trial court credited SLS evidence; findings on amount not clearly erroneous (debt proven) |
| Special defenses (payment, estoppel, unclean hands) | SLS: defenses unsupported; records and testimony show default and insufficiency of defendant evidence | Cambridge: presented payment history and testimony asserting account was current or payments made | Court: rejected defenses—trial court credited plaintiff, found defendant testimony not credible; estoppel/unclean hands were not separately supported and were waived on appeal |
| Remedy — strict foreclosure vs foreclosure by sale | Plaintiff requested strict foreclosure in posttrial brief | Cambridge (and later junior creditor): substantial equity exists so sale required to protect junior interests | Court (appeals): substantial equity ($204,000 FMV v $113,111.51 debt) -> abuse of discretion to order strict foreclosure; reversed and directed foreclosure by sale |
Key Cases Cited
- World Business Lenders, LLC v. 526-528 North Main Street, LLC, 197 Conn. App. 269 (trial court standing review is plenary)
- GMAC Mortgage, LLC v. Ford, 144 Conn. App. 165 (quitclaim of title does not transfer obligations/rights in the note)
- U.S. Bank, Nat’l Assn. v. Schaeffer, 160 Conn. App. 138 (possession of a note endorsed in blank is prima facie evidence of holder status)
- AS Peleus, LLC v. Success, Inc., 162 Conn. App. 750 (clear error standard for factual findings on note ownership)
- Bank of America, N.A. v. Kydes, 183 Conn. App. 479 (burden on defendant to rebut presumption of ownership once plaintiff produces note)
- Wells Fargo Bank, N.A. v. Strong, 149 Conn. App. 384 (contractual obligations enforceable only by parties or intended beneficiaries)
- Shearn v. Shearn, 50 Conn. App. 225 (trier of fact is final judge of witness credibility)
- Brown v. Hartford, 160 Conn. App. 677 (finder of fact may credit conflicting evidence and determine debt amount)
- Cliffside Condominium Assn., Inc. v. Cushman, 100 Conn. App. 803 (conflicting and confusing evidence can defeat proof of debt)
- Fidelity Trust Co. v. Irick, 206 Conn. 484 (trial court discretion on sale vs strict foreclosure; substantial equity can require sale)
- Brann v. Savides, 48 Conn. App. 807 (equitable duty to balance rights of mortgagee and subsequent encumbrancers)
- US Bank Nat’l Assn. v. Christophersen, 179 Conn. App. 378 (refusal to order sale when property far exceeds lien can be abuse of discretion)
- Ulster Savings Bank v. 28 Brynwood Lane, Ltd., 134 Conn. App. 699 (definition of transfer of an instrument)